The Future of China – A Great Debate
I've been too tied up these past 48 hours in the Emptoris deal and related research to share my thoughts on the situation in China as much I'd like. But needless to say, a bunch of Spend Matters readers have proffered up some excellent commentary in response to a short post from earlier in the week. You can read the original post and commentary here. After I wrap up my Emptoris research, I plan to give the topic much more thought and respond in more detail next week. In the meantime, here are a few quotes from those who've commented so far:
"One major asset of China as a nation is that the rulers are not hampered by a little inconvenience called Democracy. They will be able to keep the dragon turning but heading all the smaller units and achieving overall good is still a major task. For the good of Chinese people -- and in turn for every one else in this world, let us hope and pray that China succeeds -- at a very fast clip." - Shashank Tilak
"The fact is, however, that China is not the country which has suffered the biggest blow from a political standpoint, but the US, where the paradigm of monetarist policies and laissez faire style economy is currently resting on very shaky grounds. The kind of nationalization of the US market is in itself a manifestation of market failure. The problems in China is not a result of China itself, but rather a result of the interdependencies in the global economy, and an over-dependency on the US economy." – Martin L.
"In the end, where I think the Chinese model will succeed where the US will fail is that they have time on their hands. Right now, the leadership in China is very concerned about the economy … [but] it is not their fault that things are going bad for the economy... it is an external event." – All Roads Blog (Richard Brubaker)
"Centralization and excessive government control, regulation and planning are a hindrance to a free and optimal economy. China has aspirations to be a more technical, advanced economy, but history shows that that cannot happen without a free economy. As Milton Freidman would argue, an economy can not be free unless its people are free as well." – Dave C.
I would encourage you to read the entire comment string in more detail. I'm glossing over the deeper points here, but in their entirety, the ideas represent many perspectives and are the start of a great debate about the future of China that I hope we can have in these virtual pages.
- Jason Busch
"One major asset of China as a nation is that the rulers are not hampered by a little inconvenience called Democracy. They will be able to keep the dragon turning but heading all the smaller units and achieving overall good is still a major task. For the good of Chinese people -- and in turn for every one else in this world, let us hope and pray that China succeeds -- at a very fast clip." - Shashank Tilak
"The fact is, however, that China is not the country which has suffered the biggest blow from a political standpoint, but the US, where the paradigm of monetarist policies and laissez faire style economy is currently resting on very shaky grounds. The kind of nationalization of the US market is in itself a manifestation of market failure. The problems in China is not a result of China itself, but rather a result of the interdependencies in the global economy, and an over-dependency on the US economy." – Martin L.
"In the end, where I think the Chinese model will succeed where the US will fail is that they have time on their hands. Right now, the leadership in China is very concerned about the economy … [but] it is not their fault that things are going bad for the economy... it is an external event." – All Roads Blog (Richard Brubaker)
"Centralization and excessive government control, regulation and planning are a hindrance to a free and optimal economy. China has aspirations to be a more technical, advanced economy, but history shows that that cannot happen without a free economy. As Milton Freidman would argue, an economy can not be free unless its people are free as well." – Dave C.
I would encourage you to read the entire comment string in more detail. I'm glossing over the deeper points here, but in their entirety, the ideas represent many perspectives and are the start of a great debate about the future of China that I hope we can have in these virtual pages.
- Jason Busch
Some of the comments are concerning. There seems to be a perception of the “market failing”, when in fact it was a failure of some corporations and their practices. This is not market failure, the market never failed, corporations failed.
If those that don’t understand this finally understand this, then they will realise that bailing out failed corporations sets an extremely dangerous precedent. Further stimulus and bailout money, comes from among other sources, future earnings of the tax payer. Paying back debt in the future will reduce GDP as the velocity of money in the economy slows. Pay to day and you pay in the future!
Infrastructure spending that helps to reduce the cost of doing business and has a positive impact on raising the level of productivity will however help to stimulate economic growth in the future. Just creating jobs in the near term and throwing money at “shovel ready projects” is nothing but stupid.
Excellent points ... but the thing to remember regarding infrastructure investment is that it's a simple push. A nudge to hopefully get things going. Does it get us past a tipping point? That's the question.
Personally, I think dealing with the pain without popping pills is the only long-term cure, but I'm not 100% convinced that a short-term spending plan will not have some potential to get things back on track. I used to despise Keynes. Maybe I'm just getting older, but perhaps there's something to it. Sometimes. However, if the spending package fails, we should toss Keynesianism in the left wing university rubbish bin for good and embrace the economics philosophy from the South side of Chicago (which fortunately rubbed off on our president elect by geographic osmosis -- the question is how much).
This reminds me of how much I hated the way that the Depression and FDR was taught in high school and university. It was as if government saved the day. As all of us know who studied it in depth without big government beer googles, it was far more than that. A few bullets helped, too, not to mention the invisible hand ...
Some further interesting points if you have the time:
http://news.morningstar.com/articlenet/article.asp...